Back
HIGH COURT OF JUDICATURE AT MADRAS
KRISHNAN RAMASAMY, J.
P. Sivagurunathan - Appellant
Versus
M/s Dugar Finance & Investments Limited, Rep. By its Authorized Signatory, Rajasekar, Chennai & Another - Respondents
Arb. O.P (Com.Div.) No. 592 of 2022 & A.No. 4845 of 2022
Decided On : 28-03-2023
Arbitration - Hypothecation-cum-loan Agreement - Arbitration and Conciliation Act, 1996, Section 34(2)(iii)(V)(b)(ii) - 12(5), 34(2)(b) - The court discussed the appointment of the sole arbitrator unilaterally by one of the parties, the ineligibility of the arbitrator, and the violation of principles of natural justice. The court set aside the award due to the unilateral appointment of the arbitrator, violation of Section 12(5) of the Act, and the award being against the public policy of India and principles of natural justice.
Fact of the Case:
The petitioner entered into a Hypothecation-cum-loan Agreement with the respondent and borrowed a sum of Rs.4,50,000 for the purchase of a vehicle. The petitioner alleged that the respondent failed to return the original RC book and NOC despite the petitioner's payment of Rs. 1,95,000 as a one-time settlement. The respondent unilaterally appointed a sole arbitrator and passed an ex-parte award, which the petitioner sought to set aside.
Finding of the Court:
The court found that the unilateral appointment of the arbitrator by the respondent was in violation of Section 12(5) of the Act, rendering the award unsustainable under law. The award was set aside due to the violation of the Act and the principles of natural justice.
Issues: The issues involved the unilateral appointment of the arbitrator, violation of Section 12(5) of the Act, and the lack of opportunity for the petitioner to contest the matter, leading to the violation of principles of natural justice.
Ratio Decidendi: The court held that the unilateral appointment of the arbitrator by the respondent was in violation of Section 12(5) of the Act, rendering the award unsustainable under law. The court also emphasized that any violation of provisions of the Act is against the public policy of India.
Final Decision: The court set aside the award passed by the learned Arbitrator, finding it to be against the public policy of India and in violation of the principles of natural justice.
JUDGMENT
(Prayer: Arbitration Original Petition filed under Section 34 (2) (iii) (V) (b) (ii) of the Arbitration and Conciliation Act, 1996, to set aside the award dated 25.03.2022 passed by the sole Arbitrator in his proceedings in Arbitration Claim Petition No. LDG 305 of 2021.)
1. This Arbitration Original Petition has been filed by the petitioner seeking to set aside the award dated 25.03.2022 passed by the learned sole Arbitrator.
2. The case of the petitioner is that the petitioner has entered into Hypothecation-cum-loan Agreement with the respondent and borrowed a sum of Rs.4,50,000/- by virtue of Loan Agreement No. HP 9261 dated 26.02.2015 for the purchase of vehicle namely SCORPIO, bearing registration No. TN 73W 1333. The petitioner has admitted the fact about the disbursement of the said loan. As per the terms and conditions of the aforesaid agreement, the petitioner has to repay the total sum in the form of 36 equated monthly installments of Rs.18,500/-p.m. The petitioner further submitted that after the purchase of the said vehicle, the 1st respondent got the original RC book and gave promise to return it, but failed to issue the original RC book even after several repeated requests. The petitioner was regularly paying the monthly installments without default . In this case, the petitioner had stopped paying the EMIs from 26th EMI. When the petitioner approached the 1st respondent financial institution to close the loan, a person who was handling the above said loan had started demanding exorbitant repayment of amount. Subsequently, the petitioner offered to make Rs.1,50,000/- as One Time Settlement, hereinafter referred as OTS , but was refused by the 1st respondent and they demanded a sum of Rs.5,50,000/- for the OTS. Thereafter, the 1st respondent''s authorized representative gave an offer to pay Rs. 1,95,000/- as OTS to settle the loan. So, by believing the words of the authorized representative the petitioner paid a sum of Rs. 1,95,000/- through IMPS transfer (Ref No. 101312523117) from the petitioner Indian Overseas Bank, Valmiki Branch vide Account No. 147201000004398 to the 1st respondent bank account. Subsequent to the OTS, the petitioner had sent a legal notice dated 15.02.2021 requesting to release the original RC book and to issue NOC for the cancellation of the hypothecation endorsement. But even after the receipt of the OTS i.e., a sum of Rs.1,95,000/- and the legal notice the 1st respondent failed to return the original RC book. Hence the petitioner lodged a police complaint. Since no action was taken by the inspector of police the petitioner lodged a complaint to the Commissioner of Police, Chennai dated 27.05.2021. After repeated requests and follow ups, inspector of Tiruvanmayur police station have issued the CSR bearing No.421 of 2021 dated 30.05.2021. After issuance of FIR, the 1st respondent have returned the original RC book but not the NOC. Then the 1st respondent even after the receipt of the OTS also they demanded to clear the outstanding through a notice dated 09.06.2021. The 1st respondent, on the receipt of OTS without intimation invoked the arbitration clause in the arbitration agreement and unilaterally appointed a sole Arbitrator and the Learned Arbitrator had sent a reference notice dated 27.07.2021. For which the petitioner has filed a Vakalath before the Learned Arbitrator and periodically case was adjourned for filing objection. But no other communications were received after the reference letter. The Learned Arbitrator without hearing has passed an ex-parte award on 25.03.2022. Despite non-appearance of the petitioner and without giving sufficient opportunity to the petitioner to contest and counter the matter in the arbitration, the Learned Arbitrator passed an ex-parte award dated 25.03.2022 against the petitioner,which is impugned and liable to be set aside.
3. The main grounds of challenge made by the petitioner is that the 1st respondent appointed the learned Arbitrator unilat
Unilateral appointment of an arbitrator in violation of Section 12(5) of the Arbitration and Conciliation Act, 1996 renders the award unsustainable under law and against the public policy of India.
Unilateral appointment of an arbitrator without proper notice and in violation of statutory provisions renders the resulting award unsustainable and against the public policy of India.
The main legal point established in the judgment is that the appointment of the sole arbitrator unilaterally by one of the parties was improper and impermissible, violating the provisions of Section ....
A unilateral appointment of an arbitrator by one party contravenes Section 12(5) of the Arbitration and Conciliation Act, rendering the arbitral award void ab initio and against public policy.
A unilateral appointment of an arbitrator by a party interested in the dispute is null and void under Section 12(5) of the Arbitration and Conciliation Act, 1996, as amended in 2015.
Unilateral appointment of an arbitrator by a party with vested interests breaches principles of fairness and impartiality, rendering such appointment invalid under arbitration laws.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
